China Called To Soften Electric Car Quotas By Foreign Automakers

07/14/2017

Global automakers say that the current proposals put forward by China with respect electric and hybrid cars are impossible to meet and would cause big disruption to their businesses and they have urged China to delay and soften the planned quotas for sales of those vehicles.

To protest against key elements of the country's new energy vehicles (NEVs) policy, a letter addressed to China's Minister of Industry and Information Technology, Miao Wei, was sent on June 18.

With a staggered system of quotas beginning in 2018, a goal for hybrid and electric cars to make up at least a fifth of Chinese vehicle sales by 2025, is included in the policy.

"The proposed rules' ambitious enforcement date is not possible to meet, and if unchanged would lead to a widespread disruption of the product portfolio of most automakers operating in China. At a minimum, the mandate needs to be delayed a year and include additional flexibilities," the letter said.

the Korea Automobile Manufacturers Association (KAMA), the Japan Automobile Manufacturers Association (JAMA), the European Automobile Manufacturers Association (ACEA) and the American Automotive Policy Council (AAPC) have signed the letter.

European, U.S. and Japanese automakers have long outpaced Chinese companies in exports of combustion engine cars and China is looking to promote electric vehicles to try to steal a march on such automakers in addition to aiming to reduce pollution.

43 percent of the 870,000 electric cars produced in 2016 came from China, according to management consultants McKinsey & Co. Accounting for 23 percent and 17 percent were Germany and the United States respectively.

"Because we have common concerns with the proposed NEV rules, we have joined together to offer, with utmost respect, six recommended modifications that address those concerns while still meeting the goals of those rules and other related policies," the letter said.

Some of the penalties for not reaching them, such as plans to ban carmakers from importing and producing non-NEV vehicles altogether have been asked to be reconsidered by the automakers who have also requested a delay in implementing the quotas.

Demands for equal treatment of Chinese and foreign makers have also been raised. Foreign manufacturers such as U.S. group Tesla are left at a disadvantage because currently foreign carmakers are excluded from getting full subsidies for NEVs and batteries.

"This preference for domestic automakers over import automakers undermines the environmental goals of the regulation, puts imports at a competitive disadvantage, and risks opening China up to international trade disputes," the letter said.

While Tesla has said it is in talks with the Shanghai Municipal government to try to avoid a 25 percent tariff on imported vehicles, European carmakers such as Daimler have responded to the Chinese proposals by announcing plans to ramp up local production of electric cars.

Foreign carmakers be allowed to "bank" credits accrued from already sold cars as well as to "carry forward" credits into subsequent model years and more credit given to plug-in hybrid cars for foreign manufacturers have also been demanded.